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TAX REVIEWERGENERAL PRINCIPLES:

BY: Rene Callanta

DEFINITION OF TAXATION Taxation is the inherent power of the sovereign, exercised through the

legislature, to impose burdens upon the subjects and objects within its jurisdiction,for the purpose of raising revenues to carry out the legitimate objects of thegovernment.

TAXESEnforced proportional contributions from properties and persons levied by the

State by virtue its sovereignty for the support of the government and for publicneeds.

BASIS OF TAXATION> G !E"#$E#T%& #E'ESS(T)* The existence of the government depends upon its capacity to perform its

two + - basic functions%.. to serve the people

/.. to protect the people

THEORY OF TAXATION>"E'(0" '%& 12T(ES 3 S200 "T %#1 0" TE'T( #

4- Support on the part of the taxpayers- 0rotection and benefits on the part of the government

BENEFITS RECEIVED PRINCIPLE+CIR vs. ALGUE- 1espite the natural reluctance to surrender part of ones hard earned income

to the taxing authority, every person who is able to must contribute his sharein the running of the government.

The government is expected to respond in the form of tangible or intangiblebenefits intended to improve the lives of the people and enhanced theirmaterial and moral values.

(n return for his contribution, the taxpayer receives the general advantagesand protection which the government affords the taxpayer and his property.

ne is compensation or consideration for the other. 0rotection for support andsupport for protection.

5owever, it does not mean that only those who are able topay taxes can enjoy the privileges and protectiongiven to a citi6en by the government.

LORENZO vs. POSADAS > The only benefit to which the taxpayer is entitled is that derived form the

enjoyment of the privileges of living in an organi6ed society established andsafeguarded by the devotion of taxes to public purpose. The governmentpromises nothing to the person taxed beyond what maybe anticipated froman administration of the laws for the general good.

> Taxes are essential to the existence of the government. Theobligation to pay taxes rests not upon the privileges enjoyed by or theprotection afforded to the citi6en by the government, but upon the necessityof money for the support of the State. 3or this reason, no one is allowed toobject to or resist payment of taxes solely because no personal benefit to himcan be pointed out as arising from the tax.

ESSENTIAL ELEMENTS OF A TAX4- (t is an enforced contribution

- (t is generally payable in money7- (t is proportionate in character

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8- (t is levied on persons, property, or the exercise of a right or privilege9- (t is levied by the State which has jurisdiction over the subject or object of

taxation:- (t is levied by the law;ma (t is possible for an exaction to be both a tax and a regulation. &icense fees

and charges, loo Taxation is no longer a measure merely to raise revenue to support the

existence of the government. Taxes may be levied with a regulatory purposeto provide means for rehabilitation and stabili6ation of a threatened industrywhich is affected with public interest as to be within the police power of theState.

LIFEBLOOD DOCTRINE

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> Taxes are the lifeblood of the nation

> Aithout revenue raised from taxation, the government will not survive,resulting in detriment to society. Aithout taxes, the government would be

paraly6ed for lac< of motive power to activate and operate it. + CIR vs. ALGUE- > Taxes are the lifeblood of the government and there prompt and certain

availability is an imperious need.

> Taxes are the lifeblood of the nation through which the agencies of thegovernment continue to operate and with which the state effects its functionsfor the benefit of its constituents

ILLUSTRATIONS OF THE LIFEBLOOD THEORY 4- 'ollection of the taxes may not be enjoined by injunction

- Taxes could not be the subject of compensation or set off 7- % valid tax may result in destruction of the taxpayerBs property

8- Taxation is an unlimited and plenary power

POWER TO TAX AND POWER TO DESTROY

* > The power to tax includes the power to destroy if it is used as an implement ofthe police power +regulatory- of the State. However , it does not include the power todestroy if it is used solely for the purpose of raising revenue. + ROXAS vs. CTA-

# TES > (f the purpose of taxation is regulatory in character, taxation is used to

implement the police power of the state

> (f the power of taxation is used to destroy things, businesses, or enterprisesand the purpose is to raise revenue, the court will come in because there willbe violation of the inherent and constitutional limitations and it will bedeclared invalid.

NATURE OF THE TAXING POWER4- %ttribute of sovereignty and emanates from necessity, relin@uishment of

which is never presumed- &egislative in character, and

7- Subject to inherent and constitutional limitations

NECESSITY THEORY > Existence of a government is a necessity and cannot continue without any

means to pay for expenses

BENEFITS # PROTECTION THEORY > "eciprocal duties of protection and support between State and inhabitants.

(nhabitants pay taxes and in return receive benefits and protection from theState

SCOPE OF LEGISLATIVE TAXING POWER4- The persons, property and excises to be taxed, provided it is within its

jurisdiction

- %mount or rate of tax7- 0urposes for its levy, provided it be for a public purpose8- Cind of tax to be collected9- %pportionment of the tax:- Situs of taxation=- $ethod of collection

ASPECTS OF TAXATION4- &E!) or ($0 S(T( #

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enactment of tax lawslegislative in character

- %SSESS$E#Tcollection

administrative in character# TES

> (t is inherent in the power to tax that the State is free to select the object oftaxation

> The power of he !e"#s!$ %re o #&pose $' #()!%*es he power 4- what to tax

- whom to tax7- how much to tax

BAGATSING vs. RA+IREZ > Ahat cannot be delegated is the legislative enactment of a tax measure but

as regards to the administrative implementation of a tax law that can bedelegated.

> The collection may be entrusted to a private corporation.

> The rule that the power of taxation cannot be delegated does not apply tothe administrative implementation of a tax law

> There is no violation because what is delegated or entrusted is thecollection and not the enactment of such laws

> The issuance of regulations or circulars by the /(" or the Secretary of3inance should not go beyond the scope of the tax measure

BASIC PRINCIPLES OF A SOUND TAX SYSTEM4- T5E "ET('%& D2ST('E

- 3(S'%& %1E 2%')7- %1$(#(ST"%T(!E 3E%S(/(&(T)

# TESFISCAL ADEQUACY

; !( &%T( # F !%&(1 > Sources of revenue should be sufficient to meet the demands of public

expenditure

> "evenues should be elastic or capable of expanding or contracting annuallyin response to variations in public expenditure

>Elasticity may be obtained without creating annually any new taxes or anynew tax machinery but merely by changes in the rates applicable to existingtaxes

> Even if a tax law violates the principle of 3iscal %de@uacy , in other words,the proceeds may not be sufficient to satisfy the needs of the government,still the tax law is valid

ADMINISTRATIVE FEASIBILITY ; !( &%T( # F !%&(1 > The tax law must be capable of effective or efficient enforcement > Tax laws should be capable of convenient, just and effective administration

> Tax laws should close;up the loopholes for tax evasion and deterunscrupulous officials from committing fraud

> There is no law that re@uires compliance with this principle, so even if thetax law violates this principle such tax law is valid.

THEORETICAL "USTICE

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; !( &%T( # F (#!%&(1 > This principle mandates that taxes must be just, reasonable and fair

Taxation shall be uniform and e@uitable

> E@uitable taxation has been mandated by our constitution, as if taxes areunjust and unreasonable then they are not e@uitable, thus invalid.

> The tax burden should be in proportion to the taxpayers ability to pay+ ABILITY TO PAY PRINCIPLE-

DISTINCTIONS

TAXATION $%& POLICE POWER $%& EMINENT DOMAIN1) As o p%rpose

T$'$ #o( F for the support of the governmentE(e( Do&$#( H; for public usePo!#)e Power F to promote general welfare, public health, public morals, andpublic safety.

,- As o )o&pe(s$ #o(T$'$ #o( F 0rotection and benefits received from the government.E(e( Do&$#( F just compensation, not to exceed the mar

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e) EFFECT OF PAY+ENT 3ailure to pay a tax does not ma

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1. To!! is a sum of money for the use of something. (t is the consideration whichis paid for the use of a road, bridge, or the li

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8. That they be li@uidated and demandable.

9. That over neither of them there be any retention or controversy, commencedby third persons and communicated in due time to the debtors.

R.le% *e: %et o o* 'o()en%at+on o /e0t%

Gene*al *.le % tax delin@uency cannot be extinguished by legalcompensation. This is so because the government and the tax delin@uent arenot mutually creditors and debtors. #either is a tax obligation an ordinary act.$oreover, the collection of a tax cannot await the results of a lawsuit againstthe government. 3inally, taxes are not in the nature of contracts but grow outof the duty to, and are the positive acts of the government to the ma

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Tax of a fixed amount imposed on persons residing within a specified territory,whether citi6ens or not, without regard to their property or the occupation orbusiness in which they may be engaged, i.e. community tax.

. 0roperty tax

Tax imposed on property, real or personal, in proportion to its value or inaccordance with some other reasonable method of apportionment.

7. Excise tax

% charge impose upon the performance of an act, the enjoyment of privilege, orthe engaging in an occupation.

AS TO PURPOSE

GeneralJfiscal revenue tax is that imposed for the purpose of raising public fundsfor the service of the government.

% special or regulatory tax is imposed primarily for the regulation of useful or non;useful occupation or enterprises and secondarily only for the purpose of raising publicfunds.

AS TO 2HO BEARS THE BURDEN

4. 1irect tax

% direct tax is demanded from the person who also shoul,ders the burden of thetax. (t is a tax which the taxpayer is directly or primarily liable and which he or shecannot shift to another.

. (ndirect tax

%n indirect tax is demanded from a person in the expectation and intention thathe or she shall indemnify himself or herself at the expense of another, fallingfinally upon the ultimate purchaser or consumer. % tax which the taxpayer canshift to another.

AS TO THE SCOPE OF THE TAX

4. #ational tax

% national tax is imposed by the national government.

. &ocal tax

% local tax is imposed by the municipal corporations or local government units+&G2s-.

AS TO THE DETER+INATION OF A+OUNT

4. Specific tax

% specific tax is a tax of a fixed amount imposed by the head or number or bysome other standard of weight or measurement. (t re@uires no assessment otherthan the listing or classification of the objects to be taxed.

. %d valorem tax

%n ad valorem tax is a fixed proportion of the value of the property with respectto which the tax is assessed. (t re@uires the intervention of assessors or appraisers toestimate the value of such property before due from each taxpayer can bedetermined.

AS TO GRADUATION OR RATE

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4. 0roportional tax

Tax based on a fixed percentage of the amount of the property receipts or otherbasis to be taxed. Example real estate tax.

. 0rogressive or graduated tax

Tax the rate of which increases as the tax base or brac

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7. spe)#$! $' 1 levied for a special purpose

8. spe)#f#) $'es F imposed on a specific sum by the head or number or by somestandards of weight or measurement

9. $* v$!ore& $' F tax imposed upon the value of the article

10. !o)$! $'es F taxes levied by local government units pursuant to validlydelegated power to tax

11. pro"ress#ve $'es F rate increases as the tax base increases and

12. re"ress#ve $'es F rate increases as tax base decreases.

GENERAL RULE:

; Taxes are personal to the taxpayer. 'orporationBs tax delin@uency cannot beenforced on the stoc

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7. 1istribution of copies 7 days before the 7 rd reading.

g- 0residential power to grant reprieves, commutations and pardons, and remit finesand forfeitures after conviction by final judgment.

D#re) 1

a- "evenue bill must originate exclusively in 5.". but the Senate may propose withamendments.

b- #on;imprisonment for non;payment of poll tax.

c- Taxation shall be uniform and e@uitable.

d- 'ongress shall evolve a progressive system of taxation.

e- Tax exemption of charitable institutions, churches and personages or convents

appurtenant thereto, mos@ues, non;profit cemeteries, and all lands, buildings andimprovements %1E +actually, directly , exclusively- used for charitable, religious, andeducational purposes.

f- Tax exemption of all revenues and assets used %1E for educational purposes of F

4. #on;profit non;stoc< educational institutions.

. 0roprietary or cooperative educational institutions subject to limitationsprovided by law including F

a- restriction on dividends

b- provisions for re;investments.g- Tax exemption of grants, endowments, donations or contributions %1E foreducational purposes, subject to conditions prescribed by law.

h- #o tax exemption without the concurrence of a majority of all members of'ongress.

i- S' power to review judgments or orders of lower courts in all cases involving F&egality of any tax. (mpost or toll, &egality of any penalty imposed in relation thereto.

INHERENT LIMITATIONS# TES PUBLIC PURPOSE F

GO@ERN+ENTAL PURPOSE

RULE

KThe &egislature is without the power to appropriate revenues for anythingbut for public purposes.L

RULE

K0ublic money can only be spent for a public purpose.L

PUBLIC PURPOSE F % purpose affecting the inhabitants of the State or taxingdistrict as a community and not merely as individuals

> 0ublic purpose includes not only direct benefits or advantage, it alsoincludes indirect benefits or advantage

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TIO vs. @IDEOGRA+

> (t is not the immediate result but the ultimate result that determines,whether the purpose is public or not

> (t is not the number of persons benefited but it is the character of thepurpose that determines the public character of such tax law

> Ahat is not allowed is that if it has no lin< to public welfare

> 0ublic purpose is determined by the use to which the tax money is devoted

> (f it benefits the community in general then it is for a public purpose nomatter who collects it

TEST

4. (f the public advantage or benefit is merely incidental in the promotion of aparticular enterprise, that will render the law (#!%&(1

2. (f what is incidental is the promotion of a private enterprise, the tax law isstill for a public purpose+!%&(1-

> % tax levied for a private, not public purpose constitutes ta %lthough private individuals are directly benefited, the tax would still bevalid, provided such benefit is only incidental

> (f what is incidental is the promotion of a private enterprise, as long asthere is a lin< to the public welfare, the purpose is still public

> The test is not as to who receives the money, but the character of thepurpose for which it is expended

> #ot the immediate result of the expenditure, but rather the ultimate

> The es h$ &%s 3e $pp!#e* #( *e er(#(" whe her he p%rpose #s p%3!#)or pr#v$ e

4- The character of the direct object

- The ultimate result not the immediate result

7- The general welfare for public good

TEST OF RIGHTFUL TAXATION

; 0roceeds of a tax must be used

4- for the support of the government

- for any of the recogni6ed objects of the government

7- to promote the welfare of the community

LEGISLATIVE PREROGATIVE

RULE (t is 'ongress which has the power to determine whether the purpose ispublic or private

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> )ou can always @uestion the validity of such tax measure on the groundthat it is not for a public purpose before the courts. /ut once it is settled thatit is for a public purpose, you can no longer in@uire on such tax measure

TAXPAYERS SUIT; a case where the act complained of directly involves the illegal disbursement

of public funds derived from taxation

> courts discretion to allow

> Taxpayers have sufficient interest of preventing the illegal expenditures ofmoney raised by taxation + NOT 1 #%T( #S %#1 ' #T"(/2T( #S-

> % taxpayer is not relieved from the obligation of paying a tax because of hisbelief that it is being misappropriated by certain officials

> % taxpayer has no legal standing to @uestion executive acts that do notinvolve the use of public funds. + GONZALES vs. +ARCOS-

LOZADA vs. CO+ELEC

> (t is only when an act complained of which may include a legislativeenactment of a statute, involves the illegal expenditure of public money thatthe so;called taxpayers suit may be allowed.

CALTEX vs. COA

> Taxpayers may be levied with a regulatory purpose to provide means forthe rehabilitation and stabili6ation of a threatened industry which is affectedwith the public interest as to be within the police power of the State.

> % law imposing burdens may be both a tax measure and an exercise of thepolice power in which case the license fee may exceed the necessaryexpenses of police surveillance and regulation.

REQUISITES FOR A TAXPAYERS PETITION

4- That money is being extracted and spent in violation of specific constitutionalprotections against abuses of legislative power

- That public money is being deflected to any improper purpose

7- That the petitioner see The Supreme 'ourt has discretion whether or not to entertain taxpayerssuit and could brush aside lac< of locus standi

CONCEPTS RELATIVE TO PUBLIC PURPOSE4- (ne@ualities resulting from the singling out of one particular class for taxation

or exemption infringe no constitutional limitation

(t is inherent in the power to tax that the legislature is free to selectthe subject of taxation

- %n individual taxpayer need not derive direct benefits from the tax

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The paramount consideration is the welfare of the greater portion ofthe population

7- 0ublic purpose is continually expanding. %reas formerly left to private

initiative now loose their boundaries and may be underta The Ph#!#pp#(es $*op s he "e(er$!!0 $))ep e* pr#()#p!es of #( er($ #o($! !$w$s p$r of he !$w of he !$(*

> (f a tax law violates certain principles of international law, then it is not onlyinvalid but also unconstitutional

GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT PROPERTY

4- Sovereign e@uality of States

- 2sage among States

7- (mmunity from suit of a State

# TES NON4DELEGATION OF THE POWER TO TAX

GENERAL RULE

; The power of taxation is peculiarly and exclusively legislative, therefore, itmay not be delegated

EXCEPTIONS:

4- 1elegation to the 0resident

- 1elegation to local government units

7- 1elegation to administrative units

POWERS WHICH CANNOT BE DELEGATED

4- 1etermination of the subjects to be taxed

- 0urpose of the tax

7- %mount or rate of the tax

8- $anner, means and agencies of collection

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9- 0rescription of the necessary rules with respect thereto

DELEGATION TO THE PRESIDENT

> 'ongress may authori6e, by law, the 0resident to fix, within specified limitsand subject to such limitations and restrictions as it may impose

4- Tariff rates

- (mport and export @uotas

7- Tonnage and wharfage dues

8- ther duties and import within the national development program of thegovernment

> There must be a law authori6ing the 0resident to fix tariff rates

> The delegation of power must impose limitations and restrictions andspecify the minimum as well as the maximum tariff rates.

FLEXIBLE TARIFF CLAUSE +SE'. 8M4 T''-

; (n the interest of national economy, general welfare andJor national security,

the 0resident upon the recommendation of the #ational Economic and1evelopment %uthority is empowered

1) To increase, reduce or remove existing protective rates of import duty, prov#*e* that the increase should not be higher than 4MMN ad valorem

- To establish import @uota or to ban imports of any commodity

7- To impose additional duty on all imports not exceeding 4MN ad valorem

DELEGATION TO LOCAL GOVERNMENT UNITS

> Each local government unit has the power to create its own revenue and tolevy taxes, fees and charges subject to such guidelines and limitations as the'ongress may provide + ART X Se) : -

> &ocal government units have no power to further delegate saidconstitutional grant to raise revenue, because what is delegated is not theenactment or the imposition of a tax, it is the administrative implementation

BASCO vs. PAGCOR

> The power of local government units to impose taxes and fees is alwayssubject to the limitations which 'ongress may provide, the former having noinherent power to tax.

> $unicipal corporations are mere creatures of 'ongress which has the powerto create and abolish municipal corporations. 'ongress therefore has thepower to control over local government units. (f 'ongress can grant to amunicipal corporation the power to tax certain matters, it can also provide forexemptions or even ta

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DELEGATION TO ADMINISTRATIVE AGENCIES

> 3or the delegation to be constitutionally valid, the law must be complete initself and must set forth sufficient standards

> 'ertain aspects of the taxing process that are not really legislative in natureare vested in administrative agencies. (n these cases, there really is nodelegation, to wit

%- power to value property

/- power to assess and collect taxes

'- power to perform details of computation, appraisement or adjustments.

# TES EXEMPTION OF GOVERNMENT AGENCIES

4- %gencies performing governmental functions

TAX EXE+PT

- %gencies performing proprietary functions

> SUB?ECT TO TAX

* > The exemption applies only to governmental entities through which the

government immediately and directly exercises its sovereign powers.NDC vs. CEBU CITY

> Tax exemption of property owned by the "epublic of the 0hilippines refersto the property owned by the government and its agencies which do not haveseparate and distinct personality.

> Those with ORIGINAL CHARTERS +incorporated agencies-

> Those created by SPECIAL CHARTER +incorporated agencies- are (o)overe* 30 he e'e&p #o(

GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX

4- GS(S

- SSS

7- 05('

8- 0'S

9- 0%G' "

REASON FOR EXE+PTIONS

4- Government will be taxing itself to raise money for itself.

- (mmunity is necessary in order that governmental functions will not beimpeded.

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# TES : TERRITORIAL "URISDICTION

RULES

> Tax laws cannot operate beyond a StateBs territorial limits

> The government cannot tax a particular object of taxation which is notwithin its territorial jurisdiction.

> 0roperty outside ones jurisdiction does not receive any protection of theState

> (f a law is passed by 'ongress, 'ongress must always see to it that theobject or subject of taxation is within the territorial jurisdiction of the taxingauthority

SITUS OF TAXATION

0lace of taxation

RULE:

; The State where the subject to be taxed has a situs may rightfully levy andcollect the tax

> (n determining the situs of taxation, you have to consider the nature of thetaxes

E'$&p!e

4- 0 && T%O, '%0(T%T( # T%O, ' $$2#(T) T%O

> "esidence of the taxpayer

- "E%& 0" 0E"T) T%O " 0" 0E"T) T%O

> &ocation of the property

2e )$( o(!0 #&pose proper 0 $' o( he proper #es of $ perso( whoseres#*e()e #s #( he Ph#!#pp#(es.

EXCEPTIONS TO THE TERRITORIALITY RULE

A) 2here he $' !$ws oper$ e o% s#*e err# or#$! %r#s*#) #o(

4- T%O%T( # of resident citi6ens on their incomes derived from abroad

B) 2here $' !$ws *o (o oper$ e w# h#( he err# or#$! %r#s*#) #o( of he S $ e4- Ahen exempted by treaty obligations

- Ahen exempted by international comity

SITUS OF TAX ON REAL PROPERTY

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LEX REI SITUS or where the property is located

"E%S #

The place where the real property is located gives protection to thereal property, hence the property or its owner should support thegovernment of that place

SITUS OF PROPERTY TAX ON PERSONAL PROPERTY

; +OBILIA SE UNTUR PERSONA+

P movables follow the owner

P movables follow the domicile of the owner

RULES:

5- TANGIBLE PERSONAL PROPERTY

; Ahere located, usually the owners domicile

,- INTANGIBLLE PERSONAL PROPERTY

G. ". F 1omicile of the owner

EO'E0T( # The situs location not domicile

> Ahere the intangible personal property has ac@uired a business situs in another jurisdiction

* > The principle of +o3#!#$ Se %( %r Perso($&L is only for purposes ofconvenience. (t must yield to the actual situs of such property.

* > Perso($! #( $("#3!e proper #es wh#)h $) %#res 3%s#(ess s# %s here #( hePh#!#pp#(es

4- 3ranchise which is exercised within the 0hilippines

- Shares, obligations, bonds issued by a domestic corporation

7- Shares, obligations, bonds issued by a foreign corporation, Q9N of its business isconducted in the 0hilippines

8- Shares, obligations, bonds issued by a foreign corporation which shares of stoc< orbonds ac@uire situs here

9- "ights, interest in a partnership, business or industry established in the 0hilippines

> These intangible properties ac@uire business situs here in the 0hilippines, youcannot apply the principle of K +o3#!#$ Se %( %r Perso($&L because the propertieshave ac@uired situs here.

SITUS OF INCOME TAX

A- DO+ICILLARY THEORY

; The location where the income earner resides in the situs of taxation

B- NATIONALITY THEORY

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; The country where the income earner is a citi6en is the situs of taxation

C- SOURCE RULE

; The country which is the source of the income or where the activity thatproduced the income too< place is the situs of taxation.

SITUS OF SALE OF PERSONAL PROPERTY

> The place where the sale is consummated and perfected

SITUS OF TAX ON INTEREST INCOME

> The residence of the borrower who pays the interest irrespective of theplace where the obligation was contracted

CIR vs. BOAC

> "evenue derived by an of;line international carrier without any flight fromthe 0hilippines, from tic Ahere the transaction performedHOPE2ELL vs. CO+. OF CUSTO+S

> The power to levy an excise upon the performance of an act or theengaging in an occupation does not depend upon the domicile of the personsubject to the exercise, nor upon the physical location of the property or inconnection with the act or occupation taxed, but depends upon the place onwhich the act is performed or occupation engaged in.

Thus, the gauge of taxability does not depend on the location of the office, butattaches upon the place where the respective transaction is perfected andconsummated

CONSTITUTIONAL LIMITATIONSI& DUE PROCESS

> 1ue process mandates that (o perso( sh$!! 3e *epr#ve* of !#fe4 !#3er 04 or proper 0 w# ho% *%e pro)ess of !$w.

PEPSI COLA vs. +UN. OF TANAUAN

; REQUIREMENTS OF DUE PROCESS IN TAXATION

4- Tax must be for a 0ublic purpose

- (mposed within the Territorial jurisdiction

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7- #o arbitrariness or oppression in

%- assessment, and

/- collection

DUE PROCESS IN TAXATION DOES NOT REQUIRE

1) De er($ #o( hro%"h %*#)#$! #( %#r0 of

%- property subject to tax

/- amount of tax to be imposed

,- No #)e of he$r#(" $s o

%- amount of the tax

/- manner of apportionment

REQUISITES OF DUE PROCESS OF LAW

4- There must be a valid law

- Tax measure should not be unconscionable and unjust as to amount toconfiscation of property

7- Tax statute must not be arbitrary as to find no support in the constitution

> $hen is %eprivation o# li#e, li&ert" or propert" %one in a''or%an'eith %)e pro'ess o# la R

4- (f done under authority of a law that is valid or of the constitution itself

- %fter compliance with fair and reasonable methods of procedure prescribedby law.

> (f properties are taxed on the basis of an invalid law, such deprivation is aviolation of due process

RE+EDYF as< for refund

> To justify the nullification of a tax law, there must be a clear andune@uivocal breach of the constitution

> There must be proof of arbitrariness

INSTANCES WHEN THE TAX LAW MAYBE DECLARED ASUNCONSTITUTIONAL 5C! O! N! U6

1) (f it amounts to )o(f#s)$ #o( of proper 0 without due process

2) (f the subject of taxation is o% s#*e of he %r#s*#) #o( of the taxingstate

3) The law maybe declared as unconstitutional if it is imposed (o for $ p%3!#) p%rpose

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4) (f a tax law which is applied retroactively, imposes %( %s $(*oppress#ve $'es .

> % tax law which denies a taxpayer a fair opportunity to assert his substantial

rights before a competent tribunal is invalid

> A $'p$0er &%s (o 3e *epr#ve* of h#s proper 0 for (o( p$0&e( of $'esw# ho%

4- notice of liability

- sale of property at public auction

> The validity of statute maybe contested only by one who will sustain a directinjury in conse@uence of its enforcement

> % violation of the inherent limitations on taxation would contravene theconstitutional injunctions against deprivation of property without due processof law

> There must be proof of arbitrariness, otherwise apply the presumption ofconstitutionality

> 1ue process re@uires hearing before adoption of legislative rules byadministrative bodies of interpretative rulings. + +#s$s vs. DFA-

> 'ompliance with strict procedural re@uirements must be followed effectivelyto avoid a collision course between the states power to tax and the individual

recogni6ed rights +CIR vs. A!"%e-

> The due process clause may correctly be invo SUBSTATNTI@E DUE PROCESS re@uires that a tax statute must be within theconstitutional authority of 'ongress to pass and that it be reasonable, fairand just

> PROCEDURAL DUE PROCESS re@uires notice and hearing or at least anopportunity to be heard

((& EQUAL PROTECTION CLAUSE

> A!! perso(s4 $!! proper #es4 $!! 3%s#(esses sho%!* 3e $'e* $ he s$&e r$ e

> prohibits class legislation

> prohibits undue discrimination

EQUALITY IN TAXATION 7UNIFORMITY8

> E %$!# 0 #( $'$ #o( re %#res h$ $!! s%3 e) s or o3 e) s of $'$ #o( s#!$r!0s# %$ e* sho%!* 3e re$ e* $!# e or p% o( e %$! foo #(" 3o h o( he pr#v#!e"e)o(ferre* $(* !#$3#!# #es #&pose*

> %ll taxable articles of the same class shall be taxed at the same rate

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> The 1octrine does not re@uire that persons or properties different in fact betreated in law as though there were the same. Ahat it prohibits is classlegislation which discriminates against some and favors others

> %s long as there are rational or reasonable grounds for doing so, 'ongressmay group persons or properties to be taxed and it is sufficient if all membersof the same class are subject to the same rate and the tax is administeredimpartially upon them.

REQUISITES OF A VALID CLASSIFICATION 7S A G E 8

4- (t must be based on s%3s $( #$! *#s #() #o(

- (t must $pp!0 (o o(!0 o he prese( )o(*# #o( , but also to future conditions

7- (t must be "er&$(e o he p%rpose of he !$w

8- (t must $pp!0 e %$!!0 to all members of the same class

SUBSTANTIAL DISTINCTION

> (t must be real, material and not superficial distinction

> Ahat is not allowed is ine@uality resulting from singling out of a particularclass which violates the re@uisites of a valid classification

> There maybe ine@uality but as long as it does not violate the re@uisites of avalid classification that such mere ine@uality is not enough to justify thenullification of a tax law or tax ordinance

> Taxation is e@uitable when its burden falls on those better able to pay

> %lthough the e@ual protection clause does not forbid classification, it isimperative that the substantial differences having a reasonable relation to thesubject of the particular legislation

> Taxes are uniform and e@ual when imposed upon all property of the sameclass or character within the taxing authority

> Tax exemptions are not violative of the e@ual protection clause, as long asthere is valid classification.

TIU vs. CA

The 'onstitutional right to e@ual protection of the law is not violated by anexecutive order, issued pursuant to law, granting tax and duty incentives only tobusiness within the Ksecured areaL of the Subic Special Economic oneL anddenying them to those who live within the 6one but outside such Kfenced inLterritory. The 'onstitution does not re@uire the absolute e@uality amongresidents. (t is enough that all persons under li

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4 - 2he( )!$ss#f#)$ #o( #s &$*e where here sho%!* 3e (o(e

ex. Ahen the classification does not rest upon substantial distinctions that ma (f the ordinance is intended to supply to a specific taxpayer and to no oneelse regardless of whether or not other entities belonging to the same classare established in the future, it is a violation of the e@ual protection clause,

but if it is intended to apply also to similar establishments which maybeestablished in the future, then the tax ordinance is valid even if in themeantime, it applies to only one entity or taxpayer for the simple reason thatthere is so far only one member of the class subject of the tax measure

UNIFORMITY IN TAXATION

> The concept of uniformity in taxation implies that all taxable articles orproperties of the same class shall be taxed at the same rate.

(t re@uires the uniform application and operation, without discrimination, ofthe tax in every place where the subject of the tax is found. (t does not,however, re@uire absolute identity or e@uality under all circumstances, butsubject to reasonable classification.

EQUITY IN TAXATION

> The concept of e@uity in taxation re@uires that the apportionment of the taxburden be more or less, just in the light of the taxpayerBs ability to shoulder totax burden and if warranted, on the basis of the benefits received from thegovernment. (ts cornerstone is the taxpayers ability to pay.

CRITERIA OF EQUAL PROTECTION

4- 2he( he !$ws oper$ e %(#for&!0

%- on all persons

/- under similar circumstances

- A!! perso(s $re re$ e* #( he s$&e &$((er

%- The conditions not being different

/- /oth in privileges conferred and liabilities imposed

'- 3avoritism and preference not allowed

REYES vs. AL+AZOR

> Taxation is e@uitable when its burden falls on those better able to pay

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APATIRAN vs. TAN

> (t is inherent in the power to tax that the state be free to select the subjectsof taxation and it has been repeatedly held that ine@ualities which result from

a singling out of one particular class of taxation or exemption infringe noconstitutional limitation

III& FREEDOM OF THE PRESS

> The press is not exempt from taxation

> The sale of maga6ines or newspapers, maybe the subject of taxation

> Ahat is not allowed is to impose tax on the exercise of an activity which has

a connection with freedom of the press +license fee-> (f we impose tax on persons before they can deliver or broadcast a particularnews or information, that is the one which cannot be taxed.

TOLENTINO vs. SEC. OF FINANCE

> Ahat is prohibited by the constitutional guarantee of free press are lawswhich single out the press or target a group belonging to the press for specialtreatment or which in any way discriminates against the press on the basis ofthe content of the publication.

IV& FREEDOM OF RELIGION

> (t is the activity which cannot be taxed

> activities which have connection with the exercise of religion

A+ERICAN BIBLE SOCIETY vs. +ANILA

> The payment of license fees for the distribution and sale of bibles

suppresses the constitutional right of free exercise of religion.

?I++Y S2AGGART vs. BOARD OF E UALIZATION

> The 3ree Exercise of "eligion 'lause does not prohibit imposing a generallyapplicable sales and use tax on the sale of religious materials by a religiousorgani6ation.

> The Sale of religious articles can be the subject of the !%T

>

2h$ )$((o 3e $'e* #s he e'er)#se of re!#"#o%s worsh#p or $) #v# 0 > The income of the priest derived from the exercise of religious activity can

be taxed.

V& NON4IMPAIRMENT CLAUSE

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> The parties to the contract cannot exercise the power of taxation.

> They cannot agree or stipulate that this particular transaction may beexempt from tax; not allowed +except if government-

OPOSA vs. FACTORAN

> 0olice power prevails over the non;impairment clause

LA INSULAR vs. +ANCHUCA

> % lawful tax on a new subject or an increased tax on an old one, does notinterfere with a contract or impairs its obligation.

*he 'onstit)tional g)arantee o# the non+impairment 'la)se 'anonl" invo e% in the grant o# tax exemption.

RULES:

4- (f the exemption was granted for valuable consideration and it is granted on thebasis of a contract.

> cannot be revo cannot be revo The non;impairment clause applies only to contracts and not to a franchise.

> The non;impairment clause applies to taxation but not to police power andeminent domain. 3urthermore, it applies only where one party is thegovernment and the other, a private individual.

> %s a rule, the obligation to pay tax is based on law. /ut when, for instance, a

taxpayer enters into a compromise with the /(", the obligation of the taxpayerbecomes one based on contract

PRO@INCE OF +ISA+IS vs. CAGAYAN ELECTRIC

> 3ranchises with magic words, K sh$!! 3e #( !#e% of $!! $'es descriptive of thepayment of a franchise tax on their gross earnings are exempt from

4- all taxes- the franchise tax under the #("'

7- the franchise tax under the local tax code

?UAREZ vs. CA

> %s long as the contract affects the public welfare one way or another so asto re@uire the interference of the state, then must the police power beasserted and prevail over the impairment clause

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RULES ON TAX AMNESTY

> Tax amnesty, li The government is not estopped from @uestioning the tax liability even ifamnesty tax payments were already received

REASON Erroneous application and enforcement of the law by public officersdo not bloc< subse@uent correct application of the statute. The government isnever estopped by mista 1efense of tax amnesty, li (n case of doubt, tax amnesty is to be strictly construed against thegovernment

REASON Taxes are not construed, for taxes being burdens are not to bepresumed beyond what the tax amnesty expressly and clearly declares

VI& LAW MA9ING PROCESS

%8 ONE SUB"ECT # ONE TITLE RULE

> Every bill passed by the 'ongress shall embrace only one subject which shall beexpressed in the title thereof + Se). ,7 95- ART II -

/- THREE READING RULE

> #o bill passed by either 5ouse shall become a law unless it has passed three

readings on separate days and printed copies thereof in its final form have beendistributed to its members three days before its passage, EO'E0T when the 0residentcertifies to the necessity of its immediate enactment to meet a public calamity oremergency. + Se). ,7 9,- ART II -

PHIL. ?UDGES ASSOC. vs. PRADO

> % presidential certification dispenses with the re@uirement not only ofprinting but also that of reading the bill on separate days.

> (t is within the power of a /icameral 'onference 'ommittee to include in itsreport an entirely new provision that is not found either in the 5ouse /ill orSenate /ill, so long as such amendment is germane to the subject of the billsbefore the committee. %fter all its report was not final but needed theapproval of both houses of 'ongress to become valid as an act of thelegislative department.

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C8 ENROLLED BILL DOCTRINE

G&R& # %n enrolled copy of a bill is conclusive not only of its provisions but also ofits due enactment

EXCEPTION (n ASTORGA vs. @ILLEGAS, the Supreme 'ourt Kwent behindL theenrolled bill and consulted the journal to determine whether certain provisions ofa state had been approved by the Senate 0residentBs admission of a mista The 0resident has the power to grant reprieves, commutations and pardons andremit fines and forfeitures after conviction by final judgment. + Se). 5K4 ART @II-

NATURE OF TAX AMNESTYF % general pardon or intentional overloo The non;imprisonment rule applies to non;payment of poll tax which is

punishable only by a surcharge, but not to other violations li Taxation is said to be e@uitable when its burden falls on those better able topay

X& CONGRESS SHALL EVOLVE A PROGRESSIVE SYSTEM OF TAXATION

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PROGRESSIVITY

> Taxation is progressive when its rate goes up depending on the sources ofthe person affected

SYTEMS OF TAXATION

4 - PROPORTIONAL TAXATION

; where the tax increases or decreases in relation to the tax brac The 'onstitution does not really prohibit the imposition of indirect taxes, whichli The mandate to 'ongress is not to prescribe, but to evolve, a progressive

system of taxation

> "esort to indirect taxes should be minimi6ed but not to be avoided entirelybecause it is difficult, if not impossible to avoid them by imposing such taxesaccording to the taxpayers ability to pay.

XI& ORIGIN OF REVENUE! TARIFF o* TAX BILLS

%ll appropriation, revenue or tariff bills, bills authori6ing increase of the publicdebt, bills of local application, and private bills shall originate exclusively in the5ouse of "epresentatives, but the Senate may propose or concur with amendments.+Se) #o( ,;4 Ar #)!e @I-

RULE

; (t is not the revenue statute but the revenue bill which is re@uired by theconstitution to originate exclusively in the 5ouse of "epresentatives

REASON

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; To insist that a revenue statute and not only the bill which initiated thelegislative process culminating in the enactment of the law must substantiallybe the same as the 5ouse bill would be to deny the SenateBs power not onlyto Kconcur with amendmentsL but also to Kpropose amendments.L (t would be

to violate the co;e@uality of legislative power of the two houses of 'ongressand in fact ma The 'onstitution simply re@uires that there must be that initiative comingfrom the 5ouse of "epresentatives relative to appropriation, revenue andtariff bills.

>The 'onstitution does not also prohibit the filing in the Senate of a substitutebill in anticipation of its receipt of the bill from the 5ouse, as long as action bythe Senate is withheld until receipt of said bill + To!e( #(o vs. Se). of F#($()e -

XII& PRESIDENTIAL VETO

> KThe 0resident shall have the power to veto any particular item or items inan appropriation, revenue or tariff bill, but the veto shall not affect the item oritems to which he does not objectL 9Se). ,6 9,-4 ART @I-

XIII& TARIFF POWER OF THE PRESIDENT

KThe 'ongress may, by law, authori6ing the 0resident to fix within specific

limits, and subject to such limitations and restrictions as it may impose, tariffrates, import and export @uotas, tonnage and wharfage dues, the other dutiesor imports within the framewor< of the national development program of theGovernmentL + Se). ,= 9,-4 ART @I -

REQUISITES

4- There must be a law passed by 'ongress authori6ing the 0resident to imposetariff rates and other fees.

- 2nder the law, there must be limitations and restrictions on the exercise ofsuch power

7- The taxes that may be imposed by the 0resident are limited to%- Tariff rates

/- (mport and export @uotas

'- Tonnage and wharfage dues

1- ther duties +customs duties-

8- The imposition of these tariff and duties must be within the framewor< of the#ational 1evelopment program of the government

> 'ongress Kmay not passL a law authori6ing the 0resident to impose incometax, donors tax, and other taxes which are not in the nature of customs duties.

> The 'onstitution allows only the imposition by the 0resident of these customduties

XIV& TAX EXEMPTION OF REAL PROPERTY

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- The &ocal Government unit cannot impose tax on the national government.

> )ou can only tax those articles, which are within your jurisdiction

SEC. 74 ART X

K local government units shall have a just share, as determined by law, in thenational taxes which shall be automatically released to them.L

XX& TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS

K %ll revenues and assets of non;stoc 2nder the present tax code, for a private educational institution to beexempt from the payment of income tax, all it has to be is non;stoc< and non;profit. 5owever, a governmental educational institution is exempt from

income tax without any conditionEXEMPTION DOES NOT EXTEND TO:4- (ncome derived by these educational institutions from their property, real orpersonal, and

- 3rom activities conducted by them for profit regardless of the disposition made onsuch income

+ANILA POLO CLUB vs. CTA

> 0roceeds of the sale of real property by the "oman 'atholic church isexempt from income tax because the transaction was an isolated one

ST. PAUL HOSPITAL of ILOILO vs. CIR > (ncome derived from the hospital pharmacy, dormitory and canteen was

exempt from income tax because the operation of those entities was merelyincidental to the primary purpose of the exempt corporation

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- $here the e%)'ational instit)tion is private an% non+pro#it (&)t asto' 'orporation! it is s)& e't to in'ome tax &)t at the pre#erentialrate o# ten per'ent ( /0!

REQUISITES o* APPLICATION o ; (ncome derived by )$'% from leasing out a portion of its premises to smallshop owners, li

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MEANS EMPLOYED TO AVOID DOUBLE TAXATION

4- Tax deductions

- Tax credits

7- 0rovide for exemption

8- Enter into treatise with other states

9- %llowance on the principle of reciprocity

TAX CREDIT

; %n amount allowed as a deduction of the 0hilippine (ncome tax on account ofincome taxes paid or incurred to foreign countries. (t is given to a taxpayer inorder to provide a relief from too onerous a burden of taxation in case wherethe same income is subject to a foreign income tax and the 0hilippine (ncometax.

2HO CAN CLAI+ TAX CREDIT

4- 'iti6ens of the 0hilippines

- 1omestic corporations

CITY OF BAGUIO vs. DE LEON

> The argument against double taxation may not be invo %n ordinance imposing a municipal tax on tenement houses was challengedbecause the owners already pay real estate taxes and also income taxesunder the #("'. The Supreme 'ourt held that there was no double taxation.

The same tax may be imposed by the #ational Government as well as thelocal government. There is nothing inherently obnoxious in the exaction oflicense fees or taxes with respect to the same occupation, calling or activityby both the state and a political subdivision thereof. 3urther, a license taxmay be levied upon a business or occupation although the land used inconnection therewith is subject to property tax.

DOCTRINES ON DOUBLE TAXATION

4- 1irect 1ouble Taxation +11T- is not allowed because it amounts to confiscation ofproperty without due process of law

- )ou can @uestion the validity of double taxation if there is a violation of the E@ual

protection clause or E@uality or 2niformity of Taxation7- %ll doubts as to whether double taxation has been imposed should be resolved infavor of the taxpayer

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ESCAPE FROM TAXATION

BASIC FORMS OF ESCAPE FROM TAXATION4- S5(3T(#G

- '%0(T%&( %T( #7- T"%#S3 "$%T( #8- %! (1%#'E9- EOE$0T( #:- E!%S( #

I& SHIFTING

; Shifting is the transfer of the burden of a tax by the original payer or the oneon whom the tax was assessed or imposed to someone else

; 0rocess by which such tax burden is transferred from statutory taxpayer toanother without violating the law

> (t should be borne in mind that what is transferred is not the payment of thetax, but the burden of the tax

> nly indirect taxes may be shifted direct taxes cannot be shifted

WAYS OF SHIFTING THE TAX BURDEN

4- FOR2ARD SHIFTING

; Ahen the burden of the tax is transferred from a factor of production throughthe factors of distribution until it finally settles on the ultimate purchaser orconsumer.

Example

; $anufacturer or producer may shift tax assessed to wholesaler, who in turnshifts it to the retailer, who also shifts it to the final purchaser or consumer

- BAC 2ARD SHIFTING

; Ahen the burden of the tax is transferred from the consumer or purchaserthrough the factors of distribution to the factors of production

Example

; 'onsumer or purchaser may shift tax imposed on him to retailer bypurchasing only after the price is reduced, and from the latter to thewholesaler, or finally to the manufacturer or producer

/- ON2ARD SHIFTING

; Ahen the tax is shifted two or more times either forward or bac

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I()a't an/ In'+/en'e o Ta1at+on

I&p$) of $'$ #o( is the point on which a tax is originally imposed. (n so far asthe law is concerned, the taxpayer is the person who must pay the tax to the

government. 5e is also termed as the statutory taxpayer;the one on whomthe tax is formally assessed. 5e is the subject of the tax

I()#*e()e of $'$ #o( is that point on which the tax burden finally rests orsettle down. (t taeen +()a't! %3+ t+n-! an/ +n'+/en'e o a ta1

The #&p$) is the initial phenomenon, the sh#f #("is the intermediate process,and the #()#*e()e is the result. Thus, the impact in a sales tax +i.e. !%T- is onthe seller +manufacturer- who shifts the burden to the customer who finallybears the incidence of the tax.

I&p$) is the imposition of the tax sh#f #(" is the transfer of the tax while#()#*e()e is the setting or coming to rest of the tax.

II& CAPITALI?ATION

; "eduction is the price of the taxed object e@ual to the capitali6ed value offuture taxes on the property sold

> This is a special form of bac

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DELPHERS TRADERS CORP vs. IAC 95:6 SCRA /;K-

> The Supreme 'ourt upheld the estate planning scheme resorted to by the0acheco family in converting their property to shares of stoc< in a corporation

which they themselves owned and controlled. /y virtue of the deed ofexchange, the 0acheco co;owners saved on inheritance taxes. The Supreme'ourt said the records do not point anything wrong and objectionable aboutthis estate planning scheme resorted to. The legal right of the taxpayer todecrease the amount of what otherwise could be his taxes or altogether avoidthem by means which the law permits cannot be doubted.

E'$&p!e

3ollowing the K ho!*#(" per#o* r%!eL in capital gains transaction, by postponing thesale of the capital asset until after twelve months from date of ac@uisition you canreduce the tax on the capital gains by 9MN

V& TAX EXEMPTION

Ta1 E1e()t+on

(t is the grant of immunity to particular persons or corporations or to personsor corporations of a particular class from a tax which persons and corporationsgenerally within the same state or taxing district are obliged to pay. (t is animmunity or privilege it is freedom from a financial charge or burden to whichothers are subjected.

Exemption is allowed only if there is a clear provision there for.

(t is not necessarily discriminatory as long as there is a reasonable foundationor rational basis.

Exemptions are not presumed, but when public property is involved,exemption is the rule and taxation is the exemption.

Rat+onale o* -*ant+n- ta1 e1e()t+on%

(ts avowed purpose is some public benefit or interests which the lawma

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Nat.*e o ta1 e1e()t+on

4- (t is a mere personal privilege of the grantee.

- (t is generally revocable by the government unless the exemption is founded on acontract which is contract which is protected from impairment.

7- (t implies a waiver on the part of the government of its right to collect whatotherwise would be due to it, and so is prejudicial thereto.

8- (t is not necessarily discriminatory so long as the exemption has a reasonablefoundation or rational basis.

9- (t is not transferable except if the law expressly provides so.

9+n/% o ta1 e1e()t+on a''o*/+n- to (anne* o '*eat+on

4- E'press or $ff#r&$ #ve e'e&p #o(Ahen certain persons, property or transactions are, by express provision,

exempted from all certain taxes, either entirely or in part.

- I&p!#e* e'e&p #o( or e'e&p #o( 30 oss#o(Ahen a tax is levied on certain classes of persons, properties, or transactions

without mentioning the other classes.

Ever0 $' s $ % e &$ es e'e&p #o(s 3e)$%se of oss#o(s.

No ta1 e1e()t+on 0, +()l+'at+on

(t must be expressed in clear and unmista (n claiming tax exemption, the burden of proof lies upon the claimant

(t cannot be created by mere implication

(t cannot be presumed that you are entitled to tax exemption

)ou must prove it

RULE:

; Taxation is the rule and exemption is the exception

PR1P R*3 *A 5 1 R M * PR1P R*3

> 0roperties owned by the government whether in their proprietary orgovernmental capacity are exempt from real estate tax

TEST

; O2NERSHIP

> nce established that it belongs to the government, the nature of the use ofthe property whether proprietary or sovereign becomes immaterial.

> Exemption of public property from taxation does not extend toimprovements therein made by occupants or claimants at their own expense.

9INDS OF TAX EXEMPTIONS ACCORDING TO SCOPE OR EXTENT

4- T T%&

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; Ahen certain persons, property or transactions are exempted, expressly orimpliedly from all taxes

- 0%"T(%&

; Ahen certain persons, property or transactions are exempted, expressly orimpliedly from certain taxes, either entirely or in part.

7- There can be no simultaneous exemptions under two laws, when one grants partialexemption while other grants total exemption.

Does prov#s#o( #( $ s $ % e "r$( #(" e'e&p #o( fro& $!! $'es #()!%*e #(*#re)$'es

# . %s a general rule, indirect taxes are not included in the grant of such

exemption unless it is expressly stated.

Nat.*e o )o>e* to -*ant ta1 e1e()t+on

4 - N$ #o($! "over(&e(

The power to grant tax exemptions is an attribute of sovereignty for the power toprescribe who or what persons or property shall not be taxed.

(t is inherent in the exercise of the power to tax that the sovereign state befree to select the subjects of taxation and to grant exemptions therefrom.

2nless restricted by the 'onstitution, the legislative power to exempt is as

broad as its power to tax.- Lo)$! "over(&e( s

$unicipal corporations are clothed with no inherent power to tax or grant taxexemptions. /ut the moment the power to impose a particular tax is granted, theyalso have the power to grant exemption therefrom unless forbidden by someprovision of the 'onstitution or the law

The legislature may delegate its power to grant tax exemptions to the sameextent that it may exercise the power to exempt.

B$s)o vs. PAGCOR 95K7 SCRA :,- The power to tax municipal corporations mustalways yield to a legislative act which is superior, having been passed by the Stateitself. $unicipal corporations are mere creatures of 'ongress which has the power tocreate and abolish municipal corporations due to its general legislative powers. (f'ongress can grant the power to tax, it can also provide for exemptions or even ta% -*ant+n- ta1 e1e()t+on%

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Gene*al *.le

(n the construction of tax statutes, exemptions are not favored and are construeds r#) #ss# %r#sagainst the taxpayer. The fundamental theory is that all taxable

property should bear its share in the cost and expense of the government.T$'$ #o( #s he r%!e $(* e'e&p #o( #s he e'e&p #o(.

5e who claims exemption must be able to justify his claim or right thereto by agrant express in terms oo p!$#( o 3e s $ e( $(* oo )$ e"or#)$! o 3es#( erpre e*. (f not expressly mentioned in the law, it must be at least within itspurview by clear legislative intent.

E1'e)t+on%

4- Ahen the law itself expressly provides for a liberal construction thereof.- (n cases of exemptions granted to religious, charitable and educational institutions

or to the government or its agencies or to public property because the general rule isthat they are exempt from tax.

S r#) #( erpre $ #o( *oes (o $pp!0 o he "over(&e( $(* # s $"e()#es

0etitioner cannot invo

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The word re means to desist or refrain from exacting, inflicting orenforcing something as well as to restore what has already been ta

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CIR vs. TOUR SPECIALIST

> Gross receipts subject to tax under the tax code do not include monies orreceipts entrusted to the taxpayer which do not belong to it and does not

redound to the taxpayers benefit, and it is not necessary that there must be alaw or regulation which would exempt such monies and receipts within themeaning of gross receipts.

CONSTITUTIONAL RESTRICTION:

K#o law granting any tax exemption shall be passed without the concurrence of amajority of all members of 'ongress.L 9Se). ,= 9;- ART @I-

PRO@. OF NUE@A ECI?A vs. I+PERIAL +INING

> /asis or test for real property taxation is use and not ownership. Thus, itdoes not matter who the owner of the property is even if it is not tax exemptentity, as long as it is being used for religious, charitable or educationalpurposes, then it is tax exempt.

'onversely, even if the property taxation is owned by the government if thebeneficial use has been granted, for consideration or otherwise, to a taxableperson, then the property is subject to tax.

VI& TAX EVASION

; (t is also

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- Substantial underdeclaration of income tax returns of the taxpayer for four +8-consecutive years coupled with unintentional overstatement of deductions

EVIDENCE TO PROVE TAX EVASION

> Since fraud is a state of mind, it need not be proved by direct evidence butmay be proved from the circumstances of the case.

REPUBLIC vs. GONZALES 95/ SCRA 7/=-

> 3ailure of the taxpayer to declare for taxation purposes his true and actualincome derived from his business for two + - consecutive years is anindication of his fraudulent intent to cheat the government of its due taxes.

TAX ENFORCEMENT AND ADMINISTRATION

SOURCES OF TAX LAWS4- Statutes

- 0residential decrees7- Executive orders8- 'onstitution9- 'ourt decisions:- Tax code=- "evenue regulationsQ- %dministrative issuances

- /(" rulings4M- &ocal tax ordinances44- Tax treaties and conventions with foreign countries

PROSPECTIVITY OF TAX LAWS +%00&('%T( #-

GENERAL RULE:

; Tax laws should be applied prospectively

EXCEPTION

; (t may be applied retroactively when the law expressly provides for suchretroactive application

EXCEPTION TO THE EXCEPTION:

; (t may not be given retroactive application even if the tax law expressly soprovides if it imposes unjust and oppressive taxes.

IMPRESCRIPTIBILITY OF TAXES

GENERAL RULE:

; Taxes are imprescriptible

EXCEPTION:

; They are prescriptible if the tax laws provide for statute of limitations

PRESCRIPTIVE PERIODS:

4- 0rescriptive periods for the assessment and collection of taxes

4M years if return is tainted with falsity or fraud

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7 years if there is no fraud

- T%"(33 %#1 '2ST $S ' 1E

; %fter the expiration of 4 year from the payment of final duties.> )ou should impose those custom duties that are supposed to be imposed on theimported articles within the 4 year period, except if it is in the nature of partialli@uidation, if there is fraud or protest

7- & '%& G !E"#$E#T ' 1E

; 0rescriptive periods for local taxes and real property tax

> 9 years

> 4M years if fraud has been employed

INTERPRETATION AND APPLICATION OF TAX LAWS

Nat.*e o Inte*nal *e$en.e la>%

4- (nternal revenue laws are not political in nature.

- Tax laws are civil and not penal in nature.

Not )ol+t+'al +n nat.*e

(nternal revenue laws are not political in nature. They are deemed to be laws of the

occupied territory and not of the occupying enemy. Thus, our tax laws continued in force during the Dapanese occupation. H#!$*o v.Co!!e) or4 5 Ph#!. ,==- (t is well %

4 - R%!e whe( !e"#s!$ #ve #( e( #s )!e$r Tax statutes are to receive a reasonable construction with a view to carrying

out their purpose and intent.

They should not be construed as to permit the taxpayer easily to evade thepayment of taxes.

- R%!e whe( here #s *o%3

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7. where the taxpayer acted in bad faith

AGENCIES INVOLVED IN TAX ADMINISTRATION

4. /("

. /ureau of 'ustoms

7. 0rovincial, city, and municipal assessors and treasurers

POWERS AND DUTIES OF THE BIR

4. %ssessment and collection of all national internal revenue taxes, fees andcharges

. Give effect to and administer the supervisory and police power conferred to itby the Tax 'ode or other laws

7. Enforcement of all forfeitures, penalties and fines in connection therewith

8. Execution of judgments in all cases decided in its favor by the 'ourt of Tax%ppeals and the ordinary courts

CLASSIFFICATION OF ASSESSMENTS

1. Se!f $ssess&e( F one in which the tax is assessed by the taxpayer himself.

2. I!!e"$! $(* @o#* $ssess&e( F one wherein the tax assessor has no power toact at all.

3. Def#)#e()0 $ssess&e( F one made by the tax assessor himself whereby thecorrect amount of the tax is determined by the examination or investigation isconducted. The liability is determined and is thereafter assessed for thefollowing reasons

a. the amount ascertained exceeds that which is shown as the tax by thetaxpayer in his return

b. no amount of tax is shown in the return

c. the taxpayer did not file any return at all

4. Erro(eo%s $ssess&e( F one wherein the assessor has the power to assessbut errs in the exercise of the power.

PRINCIPLES GOVERNING TAX ASSESSMENTS

4. assessments are prima facie presumed correct and made in good faith

. assessment should be based on actual facts

7. assessment is discretionary on the part of the 'ommissioner to assess taxesmay be delegated

8. assessments must be directed to the right party.

MEANS EMPLOYED IN THE ASSESSMENT OF TAXES

4. Examination of tax returns

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. when taxpayer re@uests a reinvestigation

7. to verify compliance with withholding tax laws and regulations

8. to verify capital gains tax liabilities

9. upon order of the 'ommissioner

@ = SURCHARGE ON THE AMOUNT OF THE TAX DUE IS IMPOSED IN THEFOLLOWING CASES

4. failure to file any return re@uired under the provisions of the Tax 'ode orregulations on the date prescribed

. filing a return with an internal revenue officer other than those with whom thereturn is re@uired to be filed

7. failure to pay the tax within the time prescribed for its payment4. failure to pay the full amount of tax shown on any return re@uired to be filed

under the provisions of the Tax 'ode or regulations or the full amount of taxdue for which no return is re@uired to be filed, on or before the dateprescribed for its payment

REVENUE RULES AND REGULATIONS AND ADMINISTRATIVE RULINGS ANDOPINIONS

A)thorit" to prom)lgate r)les an% reg)lations an% r)lings an% opinions

The Secretary of 3inance, upon recommendation of the 'ommissioner of(nternal "evenue, shall promulgate needful rules and regulations for theeffective enforcement of the provisions of the #("'.

This is without the prejudice to the power of the 'ommissioner of (nternal"evenue to ma

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The authority of the $inister of 3inance, in conjunction with the 'ommissionerof (nternal "evenue, to promulgate rules and regulations for the effectiveenforcement of internal revenue rules cannot be converted. #either can it bedisputed that such rules and regulations, as well as administrative opinions

and rulings, ordinarily should deserve weight and respect by the courts. $uchmore fundamental than either of the above, however, is that all issuancesmust not override, but must remain consistent with, the law they see< toapply and implement. %dministrative rules and regulations are intended tocarry out, neither to supplant nor to modify, the law.

L$ S%er e v. Co%r of T$' App!e$!s4 5/; SCRA ,K

Ahen an administrative agency renders an opinion by means of a circular ormemorandum, it merely interprets existing law and no publication is thereforenecessary for its validity. 'onstruction by an executive branch of thegovernment of a particular law, although not binding upon courts, must begiven weight as the construction came from the branch of the government

which is called upon to implement the law.

##e'tivit" o# reven)e r)les an% reg)lations

"evenue $emorandum 'ircular M;Q: was issued to govern the drafting,issuance and implementation of revenue tax issuances including

4. "evenue "egulations

. "evenue and $emorandum rders and

7. "evenue $emorandum 'irculars and "evenue $emorandum rders.

Except when the law otherwise expressly provides, the aforesaid revenue taxissuances shall not begin to be operative until after due notice thereof may befairly assumed.

1ue notice of said issuances may be fairly presumed only after the followingprocedures have been ta

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:;R r)lings

%dministrative rulings,

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4. Summon persons on certain cases pending investigation

. (n@uire into ban< deposits

; Except Secrecy of ban< deposits law

> nly to determine the gross estate of decedent not to determine the income

7. Examine boo